Posted by Killer Joe on October 21, 2005 at 23:09:29:
This deal is too skinny given the market dynamics here in LA. Especially with a split on a condo. There is a good chance that the seller may want to recoup the cost of the REA commision as well if he can get it, so add another 5% to the cost unless you KNOW this is not the case. You may be at $336K going in, plus closing costs, holding costs, HOA, etc.
The condo market is getting soft in some parts of LA due to the irrational exuberance that has driven up prices in the last two years here. When the market slows, as it is showing signs of here, condos are the last thing you as an investor want to be holding without already having a buyer lined up. I have witnessed a few retail condo purchases fall apart due to financing lately because the lenders do not value the properties the same as the buyers. It’s a different world than it was 12 months ago.
I can only guess from your post that the REA is telling everyone the same story regarding the $320K price, and if this is correct, and the FMV is truely $397K, this property would have disappeared off the MLS day one after the acknowledgement. Just a hunch.
Don’t forget to check for special assessments this condo may have coming up, or be part of, if any. That can be a real deal killer as the next buyer will need to be notified of such action if it is publicly pending. (If the building is 20 - 25 years or older it will need some major maintinance in the future, if not already.)
Deals like this one will become the norm very soon as many folks will just be happy to get back what they paid. It’s happening already, and remember, when the market turns, condos lead the charge, and stay ahead of the pack all the way to the bottom, and are the last to recover. I’ve watched this for the last 28 years here in LA, and nothing tells me it’s going to change. Best of luck.